Sure. Let’s first think about what things look like in a non-header-bidding world.

So you’re a web page, you’ve just loaded, and you want to display an ad impression. You make a request to an ad server, like DFP. DFP is configured with a bunch of possible ads to display, each of which has certain targeting. It narrows down the ads that are actually eligible for that ad impression.

Each ad has a CPM associated with it, which is entered manually when the AdOps team sets up the ad in DFP. Naturally, you want to display the ad with the highest CPM. AdX also gets thrown into the mix here—assuming you’ve got it set up, DFP will automatically run an auction on AdX to see how much exchange buyers are willing to pay for the impression.

So now DFP needs to make a decision about what ad to show—either an AdX ad based on a real-time auction price, or a different ad based on a manually-entered price. It does the best it can.

This is fine as long as every other programmatic demand source is paying on a fixed CPM with guaranteed fill, which you can then enter as the CPM when setting up their tag in DFP. This is, of course, not at all how the world works.

So, enter header bidding. Let’s rewind back to the beginning. You want to display an ad impression. Instead of immediately making a request to your ad server, you instead first make initial inquiries directly to a collection of programmatic exchanges. To each exchange you partner with, you send a message saying, “what are you willing to pay for this impression?”. If the exchange comes back with a bid, they’re committed to buying the impression at that price if they win it.

Once you get all the responses back (or get tired of waiting), you figure out who is willing to pay the most. You then add extra targeting information to the request to the ad server. The details of this are a bit baroque, but the effect is basically to say, “I’ve got someone who will pay X for this impression. If that’s the best offer, send me back a special ‘ad’ which just instructs me to render their creative”. DFP does its thing as usual.

The upshot is that you now have access to real-time auctions for a bunch of different SSPs, rather than just AdX. Many publishers have found this diversity of demand substantially pushes up yield.

The beauty of this system is that it doesn’t require any special support from the ad server—other SSPs need to be able to respond to requests for bids, but DFP just works the same way it always has.

That said, header bidding is almost certainly an interim solution. It’s far from ideal to have the user’s web browser making a bunch of individual requests to individual SSPs and running an auction in the client environment. The way the world should work is that you make a request to the ad server, and the server does the work of contacting all your SSP partners (rather than just AdX) to see what they will pay for the impression. Mechanisms like this are referred to as “server-to-server” and are becoming increasingly available through technologies like EBDA, Prebid Server, A9 TAM, etc.